VAT Rant

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A client de-registered for VAT. Some six months later we discovered an overclaim of input VAT whilst preparing the accounts. As the VAT registration no longer existed I telephoned the VAT helpline to find out how best to deal with it. I was advised that my client should write to HMRC accounting adjustments team in Liverpool explaining what had happened and send payment of the amount to HMRC. We wrote on our clients behalf and enclosed the clients cheque for the amount due - stapled to the letter and with the clients previous VAT registration number on the back. The letter very clearly set out why we were sending the cheque, what the amount due related to, the VAT period it referred back to and the date on which the registration had been cancelled.

Great - job done - except..... today (almost one year later!) my client received a letter from HMRC DMB Banking saying there is a credit to his VAT account (equal to the amount paid over in respect of the overclaimed input tax), and what does he want to do with it! Their suggestions include "I have made an error on a previous return and the remittance is to correct my liability" (yes we have already told them that!), but then goes on to ask for it to be corrected on the next VAT return (!!) if under the prescribed limits (which it was). Obviously we cannot do that as the registration scheme has been closed. Is this bureaucracy gone mad or do they not train anyone at HMRC to do joined up thinking anymore? Does anyone there ever read letters? I dread to think how much time this one is going to take to sort out.

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I have a client with a large 'sundry creditor' sitting on the Balance Sheet thanks to HMRC VAT department not knowing their a*** from their elbow! They are completely crackers.

New client, should have been paying VAT thought they were an exempt supply. Calculated VAT for 9 months of 18 months trading. Sent in forms registering for VAT, 3 VAT Returns, de-registering for VAT and fat cheque to settle the whole lot in one go. Spent 4-6 months chasing, phoning and waiting for confirmation that all was OK. Letter received all fine.

One year later VAT office wrote advising that there was a balance of £fat cheque unallocated to be refunded and this would be sent to account number held (which had been closed in the meantime as client had reverted to partnership under which his supply was exempt for VAT purposes). Advised client to supply VAT office with new account number and wait for them to un-twist their knickers and ask for it back.

You couldn't make it up! No wonder the Chancellor can't balance his books!

It makes you wonder just how much money is just sitting in suspense accounts with HMRC not knowing how to allocate it because they don't have a "form" for it. Trying to get HMRC to do anything these days is an uphill battle and the lack of correspondence is awful.

I have another client who was subject to a VAT enquiry last September. VAT officer issued letter in November asking for further information on specific items. Information provided at beginning of December - and then nothing. I sent two or three chasers asking for confirmation that the enquiry had been closed down in view of the fact that we had heard nothing from HMRC on the matter. Received a letter today merely saying "no assessment has been raised". I can only assume from that phrasing that the enquiry has been put to bed, but it leaves the door wide open and the client without certainty that the matter will not be raised again - and why did I have to chase for it? Surely HMRC should still have procedures in place to issue closure letters. It is totally unfair on the taxpayer to leave matters hanging in the balance as they do.